Cutting ties

USMCA agreement could mean the end of B.C. wines exclusively on store shelves

By Shayna Wiwierski

A new international trade deal now means changes for B.C. wine on store shelves.

On November 30, 2018, Canada, the United States, and Mexico signed the new United States-Mexico-Canada Agreement (USMCA) which is set to replace the former North American Free Trade Agreement (NAFTA) that has been in effect since 1994 (the agreement still has to go through the legislative process in Canada, the U.S., and Mexico). Among many changes to the new act, B.C. wine lovers will soon see an expanded selection of options from outside the province on store shelves.

Under the USMCA, Canada has preserved holdovers from NAFTA, including Chapter 19, which allows for independent panels to resolve disputes involving companies and governments, and Chapter 20, which is the government-to-government dispute settlement mechanism. Canada has made concessions, including increasing the quota on foreign imports into its dairy market and other supply-managed sectors, allowing American farmers greater access to the Canadian market.

So how does that affect the wine industry? B.C. will be required to eliminate its rule which allows only B.C. wines on grocery shelves (which was originally done in a side letter to the USMCA) by November 1, 2019.

In the original NAFTA negotiation and agreement, in exchange for dropping tariffs and opening the Canadian market to U.S. wines, B.C.-only licences were grandfathered in to recognize the importance of supporting local B.C. wine. The British Columbia Wine Institute (BCWI) oversees the operation of, as a cooperative for all B.C. grape wineries, 21 similar licences allowing for all certified 100 per cent B.C. grape wines to be sampled and sold off site.

The Washington State Liquor and Cannabis Board allows Washington wineries two additional locations off site for sampling and selling wine of their own production. B.C.’s provincial government has yet to issue individual B.C. winery off-site licences, which is where the BCWI ones come in. In April 2014, the B.C. government allowed the BCWI the option to move these licences to grocery store shelves to accommodate the growth of B.C. wineries and give them better access to consumers. To date, 18 have done so, with three remaining independent, as per the BCWI.

The recent USMCA ruling continues to recognize the provenance of grandfathered B.C.-only co-op industry licences. Miles Prodan, president and CEO of the BCWI, mentions that the B.C. government also allowed other liquor store licences to move into grocery, including import wine, spirits, etc.; though for social and health responsibilities, these were mandated to be store-within-store format (with access control, separate check-out, etc.). To date, no private liquor store or grocery has taken advantage of that opportunity.

“The BCWI has no objection to import wines having access to a similar number of grocery stores on-shelf, and note that, outside of our BCWI wine stores, B.C. wine already competes with import wines in more than 1,300 liquor retail outlets across the province where we enjoy great buy local support,” says Prodan.

There has been tremendous growth of U.S. wine sales in Canada under the Canada United States Federal Trade Agreement (CUSFTA) and NAFTA, and the U.S. wine sales value to Canada has grown by $485 million since 1988. The BCWI mentions that U.S. wine sales in Canada have grown by an average of 13 per cent every year for the past 28 years, resulting in more than doubling its wine sale market shares to 14.2 per cent. By comparison, Canadian premium bottled wine sales in the U.S. market have grown to $8.4 million and represents a negligible share of total wine sales in the United States.

Canadian wine production volume is one-sixteenth the size of the U.S. industry. The province of B.C. said it plans to work with the federal government to resolve this issue in a manner that best protects the province’s wine industry.

“B.C. worked closely with the federal government and agreed to amend the measures relating to wine in grocery stores. This policy has been controversial for some time,” said Premier John Horgan and Bruce Ralston, Minister of Jobs, Trade and Technology, in a statement on October 18, 2018. “We knew this was a problem that we were going to have to fix. We will continue to work with the Canadian government to resolve it in a manner that best protects our wine industry.”